Cash Conversion Cycle - CCC


Cash Conversion Cycle - CCC
A metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows. The cash conversion cycle attempts to measure the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers. This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties.

Also known as "cash cycle".

Calculated as:

Cash Conversion Cycle (CCC)


Where:
DIO represents days inventory outstanding
DSO represents days sales outstanding
DPO represents days payable outstanding

Usually a company acquires inventory on credit, which results in accounts payable. A company can also sell products on credit, which results in accounts receivable. Cash, therefore, is not involved until the company pays the accounts payable and collects accounts receivable. So the cash conversion cycle measures the time between outlay of cash and cash recovery.

This cycle is extremely important for retailers and similar businesses. This measure illustrates how quickly a company can convert its products into cash through sales. The shorter the cycle, the less time capital is tied up in the business process, and thus the better for the company's bottom line.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Cash Conversion Cycle — Der Geldumschlag (auch Geldumschlagsdauer, englisch: cash conversion cycle, asset conversion cycle, net operating cycle, working capital cycle oder kurz cash cycle) bezeichnet im betriebswirtschaftlichen Controlling die Dauer der Bindung liquider …   Deutsch Wikipedia

  • Cash conversion cycle — The length of time between a firm s purchase of inventory and the receipt of cash from accounts receivable. The New York Times Financial Glossary …   Financial and business terms

  • cash conversion cycle — The length of time between a firm s purchase of inventory and the receipt of cash from accounts receivable. Bloomberg Financial Dictionary …   Financial and business terms

  • Цикл обращения денежных средств (CASH CONVERSION CYCLE, CASH CYCLE, EARNINGS CYCLE)  — Период времени, за который деньги обращаются в запасы, запасы преобразуются в задолженность кредиторов, а затем задолженность кредиторов превращается обратно в деньги …   Словарь терминов по управленческому учету

  • cash conversion — ˈcash conˌversion noun [uncountable] MANUFACTURING the process in which a company uses materials that it buys in order to make money from the sale of finished goods: • The cash conversion cycle is the number of days it takes a company to purchase …   Financial and business terms

  • cash conversion period — UK US noun [C] (also cash cycle) ACCOUNTING ► the period of time it takes for a company to change the value of materials it has bought into money received by selling the finished products: »The company has a cash conversion period of 81 days …   Financial and business terms

  • working capital conversion cycle — An accounting and financial phrase used to describe the dynamics of short term cash flows that occur during the normal operations of a business. The working capital conversion cycle is the circular process of borrowing money first to purchase… …   Financial and business terms

  • Cash Flow Loan — Borrowing cash typically to meet day to day operations or acquisitions. Reasons for needing a cash flow loan could be seasonal demand changes, business expansion or changes in the business cycle. Cash flow loans can help in temporary situations,… …   Investment dictionary

  • Cash Discount — An incentive that a seller offers to a buyer in return for paying a bill owed before the scheduled due date. The seller will usually reduce the amount owed by the buyer by a small percentage or a set dollar amount. If used properly, cash… …   Investment dictionary

  • Cash cycle — In general, the time between cash disbursement and cash collection. In net working capital management, it can be thought of as the operating cycle less the accounts payable payment period. The New York Times Financial Glossary * * * cash cycle UK …   Financial and business terms

  • cash cycle — In general, the time between cash disbursement and cash collection. In net working capital management, it can be thought of as the operating cycle less the accounts payable payment period. Bloomberg Financial Dictionary * * * cash cycle UK US… …   Financial and business terms